The Delhi High Court, in the case of Digipro Import and Export Pvt Ltd vs Union of India, has termed the practice of collecting undated cheques from assesses by officials of Anti-Evasion Department of Central Excise ‘illegal’.
A bench comprising Justice S Muralidhar and Justice Chander Shekhar highlighted the serious ramifications of letting this illegal practice continue.
They noted that the officials of the Anti-Evasion Department of Central Excise have to operate within the mandate of the Central Excise Act and there is no provision within the Act and the accompanying rules, notifications and circulars which allow the officials to collect duty and without even quantifying the extent of duty evasion.
The following extracts highlight the extremely serious consequences of allowing the continuation of such a practice.
“20. …What loss this entailed to the Government Exchequer is a different issue altogether. Then there is the loss of interest on the said amount. At least two scenarios are possible when such unbridled power of 'collection' of duty, on the spot, is allowed to go unchecked. One is that since there is nothing written down anywhere, the unscrupulous officers who constitute the survey/search team can 'negotiate' an amount of evaded duty and also agree to waiver of interest and penalty. This is without quantification and without a SCN. The duty evader gets away with a lighter amount and this is prejudicial to the interest of the Revenue.
The second scenario is where an Assessee refuses to comply with an illegal demand and under threat and coercion is compelled to issue cheques or pay cash which is supposed to constitute the differential duty. This is undoubtedly prejudicial to the Assessee and is harmful to public interest. It is not rule of law but anarchy unleashed by holders of public office. Neither is it an acceptable scenario in a system governed by the rule of law. It metamorphises into a system of rule by law and, worse still, by abuse of law. It has to be stopped.”
In the instant case, a writ petition had been filed by Digipro Import and Export Pvt Ltd, a manufacturer of mobile phone batteries, chargers and LED bulbs.
The company was paying 2 per cent ad valorem excise duty on mobile phone batteries and chargers, and 6 per cent on LED bulbs. It was contended by the state that the tariff rate of duties on the aforementioned products is 12.5 per cent ad valorem.
The petitioners argued for an exemption under the March 2012 notification by the Central Excise department.
Upon a search by the Anti-Evasion Wing of Central Excise, the officials seized certain documents and also collected five undated cheques, amounting which the petitioner asked the Department not to encash citing the exemption under the aforementioned notification. The bench, appalled by such a practice, termed the practice contrary to the procedure established by law.
“It is indeed extraordinary that officers at the level of a Superintendent would have such vast powers of collecting duty on the spot without even a quantification of the duty amount preceded by a show cause notice (SCN). No attempt has been made to demonstrate that the above is a procedure known to law. It actually points to the opposite. And that is what makes it inexcusable.”
Read the Order here.